Income Tax Rates and Solidarity Surcharge: Changes Starting in 2025
With the new Tax Development Act, lawmakers are planning significant adjustments to income tax rates and the solidarity surcharge starting in 2025. The basic tax-free allowance will gradually be increased to counter inflation and “bracket creep” (cold progression). The key tax rate thresholds will also be shifted upwards, while the solidarity surcharge will only apply to higher incomes. These reforms aim to provide tax relief and promote greater tax fairness.
Income Tax Rates:
According to the draft Tax Development Act, the basic tax-free allowance will increase by €300.00 to €12,084.00 in 2025 and by €252.00 to €12,336.00 in 2026. According to the draft bill, this increase exceeds the anticipated results of the 15th Minimum Subsistence Report expected in autumn 2024. The goal is to compensate for bracket creep. The other key tax rate thresholds will shift accordingly. The first tax bracket in 2025 will start at €12,085.00 (previously €11,604.00) and end at €17,430.00 (previously €17,005.00). The top tax rate of 42 percent will apply to taxable incomes starting at €68,430.00 in 2025 (previously €66,761.00) and will cap at an income of €277,825.00. The tax brackets for the so-called "wealth tax" with a 45 percent rate will remain unchanged at €277,826.00. For jointly assessed married couples, the thresholds will double.
Solidarity Surcharge:
Similarly, the exemption thresholds for the solidarity surcharge will also be increased. Jointly assessed married couples or life partners will only pay the solidarity surcharge starting in 2025 if their income tax exceeds €39,900.00 (previously €36,260.00). For individual taxpayers, the minimum threshold will be €19,450.00 (previously €18,130.00).